Sramana: I would imagine you are using the private label strategy to drive margins up, correct? That is one of the levers that you can push.
Tony Ellison: Yes, that is correct.
Sramana: What categories offer you the best levers for your private label strategy?
Tony Ellison: Traditional office supplies. We segmented our industry into A, B, C, and D. A and B are commodity segments and C and D are long tail products. Anything that falls into C and D are where we will find the margins.
Sramana: You started by outsourcing, then bring on part-time employees who later converted into full-time employees. How has your team building experience developed since then?
Tony Ellison: Our team has been built very quickly. We have close to 75 people now. We expanded internationally in 2013 when we opened up business in the U.K. and Canada. We have bodies on the ground in both of those countries.
Sramana: When you pivoted your business into a B2B procurement mode did you have to make a significant investment in your workforce?
Tony Ellison: Yes, you are correct. Most of our development work was done in house and that required a fair amount of capital.
Sramana: How are your 75 employees split up in perspective to division of labor?
Tony Ellison: We have about 25 inside sales people. We have 17 in customer service. We also have business development, creative, and IT developers. There are 6 of us on the leadership team.
Sramana: Do you operate a warehouse to manage your private label strategy?
Tony Ellison: You can use a virtual warehouse. You can strike an agreement with any of the 3PL houses out there, which saves you on the upfront cash requirements. We pay slightly more, but we reduce our risk substantially. We turned profitable in 1997 and we have been cash-flow positive since then. We have built the business on our cash flow.
Sramana: It sounds like you have traded off margin to keep the logistics complexity of the business at a minimum.
Tony Ellison: That is correct.
Sramana: That is a very smart move.
Tony Ellison: Thank you! I think we have built a phenomenal playbook. We know how to go to other parts of the world who are e-commerce friendly. About 95% of our business is transferable, the remainder requires some tweaking.
Sramana: You can expand anywhere there is a logistics infrastructure. There are some very large countries that do not have logistics infrastructure, such as India where that is an absolute disaster.
Tony Ellison: We looked at India and arrived at the same conclusion very quickly. India and China pose significant challenges. Japan is a lot better. We are also interested in Brazil.
Sramana: Fantastic. Thank you for sharing your story and congratulations on your success.